commercial electricity supply chain management …
TRANSCRIPT
COMMERCIAL ELECTRICITY SUPPLY CHAIN MANAGEMENT
PRACTICES IN KENYA
JOSEPH NDARU MURAGE
(D61/70641/2009)
A Management Research Project Report Submitted In Partial Fulfilment of the
Requirements for the Degree of Master of Business Administration (MBA), School of
Business, University of Nairobi
2011
ii
DECLARATION
I, the undersigned, declare that this is my original work and has not been submitted to any
other college, institution or university for academic credit.
Signed: ……………………………… Date: ………………………………
Joseph N. Murage
D61/70641/2009
This project report has been submitted for examination with my approval as the appointed
supervisor.
Signed: ………………………………… Date: ………………………………
Onserio Nyamwange
Lecturer, Department of Management, School of Business, University of Nairobi
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ACKNOWLEDGEMENT
My foremost gratitude goes to our almighty God for enabling and guiding me through my
academic life. I am grateful to Nairobi University for admitting me to their MBA programme
and School of Business, MBA teaching staff for upholding academic discipline. My vote of
thanks goes to my supervisor; Onserio Nyamwange who guided me as I crafted this paper, his
suggestions and prompt comments gave me impetus to refine and produce quality work.
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DEDICATION
I dedicate this paper to my family, workmates and friends; you all stood by me throughout
this programme and inspired me immensely.
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ABSTRACT
Supply Chain Management (SCM) has emerged to be one of the areas of enhancing
efficiency in an organization. According to Energy Regulatory Commission (ERC), the
increasing operational complexities within the electric subsector, delays in electricity
connection and disruption in power supply, higher manpower costs owing to higher living
costs and growing pressure from customers have led to the electric power utilities‟ growing
awareness of the impact that an efficient supply chain can have on business sustainability.
The purposes of this study was to establish the commercial electricity SCM practices in
Kenya and whether the adopted practices exhibits SCM best practices relevant to these
utilities . This study focused on the most significant SCM practices that affect the efficiency
and effectiveness of the whole electricity supply chain.
This study adapted a descriptive research design. The study targeted at all power firms
involved in generation, transmission and distribution of electricity for commercial purposes
as these firms were considered to be the principal players in the commercial electricity supply
chain. The researcher used questionnaires to gather primary data to describe some of the
SCM practices in the commercial electricity power utilities. This is because a descriptive
design is a description of state of affairs as it exists at present. Descriptive statistical analysis
was done.
The study concluded that there are a number of SCM practices adopted by the commercial
electricity utilities in Kenya and to a large extent the adopted practices are in line with the
best practices as prescribed using Supply Chain Maturity model. Recommendations for
improvements in each functional area were also made. It was further suggested that a similar
research may be conducted in other sectors of industry such as manufacturing or agriculture.
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TABLE OF CONTENTS
DECLARATION............................................................................................................................. ii
ACKNOWLEDGEMENT ............................................................................................................. iii
DEDICATION................................................................................................................................ iv
ABSTRACT ..................................................................................................................................... v
LIST OF TABLES ....................................................................................................................... viii
LIST OF FIGURES ..................................................................................................................... viii
ABBREVIATION AND ACRONYMS ........................................................................................ ix
CHAPTER ONE: INTRODUCTION ......................................................................................... 1
1.1 Background of the Study ............................................................................................................ 1
1.2 Statement of the Problem ............................................................................................................ 4
1.3 Objectives of the Study ............................................................................................................... 6
1.4 Value of the Study ...................................................................................................................... 6
CHAPTER TWO: LITERATURE REVIEW .............................................................................. 7
2.1 Defining Supply Chain Management.......................................................................................... 7
2.2 Commercial Electricity Supply Chain Management Practices ................................................... 8
2.3 Supply Chain Management Best Practices ............................................................................... 15
CHAPTER THREE: RESEARCH METHODOLOGY ........................................................... 19
3.1 Research Design........................................................................................................................ 19
3.2 Population of the Study ............................................................................................................. 19
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3.3 Data Collection Method and Instruments ................................................................................. 20
3.4 Data Analysis ............................................................................................................................ 20
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION .............................. 21
4.1 Descriptive Statistics of Power Utilities Studied ...................................................................... 21
4.2 Supply Chain Management Practices Adopted by Power Utilities in Kenya ........................... 22
4.3 Supply Chain Management Practices Best Practices in Power Utilities in Kenya ................... 23
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............. 31
5.1Summary of Findings ................................................................................................................. 31
5.2 Conclusions ............................................................................................................................... 32
5.3 Recommendations for Improvement......................................................................................... 32
5.4 Recommendations for further research ..................................................................................... 34
REFERENCES .............................................................................................................................. 38
APPENDICES ............................................................................................................................... 38
Annex I: Research Instruments ....................................................................................................... 38
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LIST OF TABLES
Table 4.1: Years of Experience of Respondents in Power Industry.........................................21
Table 4.2: Implementation Status of Supply Chain Management Practices ….......................22
Table 4.3: Supply Chain Management Best Practices in Demand Management.....................24
Table 4.4: Supply Chain Management Best Practices in Procurement Management………..25
Table 4.5: Supply Chain Management Best Practices in Operations Management………….26
Table 4.6: Supply Chain Management Best Practices in Logistics Management…………....27
Table 4.7: Supply Chain Management Best Practices in Performance Measurements………28
Table 4.8: Supply Chain Management Best Practices in CRM…………………….………..29
Table 4.9: Supply Chain Management Best Practices in IT ………………………….…......30
LIST OF FIGURES
Figure 1.1: Commercial Electricity Supply Chain ………………………………….…...........2
Figure 2.1: Stages of the Supply Chain Maturity Model…………………………………….17
Figure 3.1: Target Population of Study…………………….…………….………......………19
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ABBREVIATION AND ACRONYMS
CRM Customer Relationship Management
COM Customer Order Management
CPFR Collaborative Planning Forecasting and Replenishment
EDI Electronic Data Interchange
ERB Electricity Regulatory Board
ERC Energy Regulatory Commission
GOK Government of Kenya
IPP Independent Power Producers
KENGEN Kenya Electricity Generating Company
KETRACO Kenya Electricity Transmission Company
KPLC Kenya Power and Lighting Company
MOE Ministry of Energy
PPA Power Purchase Agreements
SCOR Supply Chain Operation Reference
SCM Supply Chain Management
SPSS Statistical Package for Social Science
SRM Supplier Relationship Management
TOC Theory of Constraints
VMI Vendor Management Inventory
3PL Third Party Logistics
4PL Fourth Party Logistics
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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Supply Chain Management (SCM) has emerged to be one of the areas of enhancing efficiency in
an organization. High customer expectations, environmental changes, globalization and rapid
technological changes, companies have to re-engineer their ways of doing business in order to
remain competitive. This calls for development of best practices in all organisational functions in
order to ensure that organisation is in line with the current business treads. Supply Chain
function is not an exception (Christopher & Lee, 2004).
Globally, SCM has received a worldwide recognition as a key business process through which
suppliers are able to provide products, services and information that add value to customers and
other stakeholders (Chan & Qi, 2003). It should be therefore a proactive approach through which
the buyer(s) decide to relate and collaborate with sellers willingly or non- willingly for mutual
benefit because each party need the other for survival.
Thomas (2004) argues that supply chain executives have a daunting daily challenge of managing
a global supply chains. They must keep customers or stores properly stocked and deliver the
perfect order every time. They must also balance the need for low costs, proper inventory levels
and maximum service delivery. In addition they must ensure that SCM is an integral component
of the company's strategic direction and plans.
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1.1.2 Kenya Electricity Supply Chain
In Kenya, electricity supply chain involves activities in power production, transmission,
distribution and consumption. These activities include materials planning, forecasting,
purchasing, inventory management, and information management, quality assurance, scheduling
production/generation, warehousing of spare parts, distribution, delivery/transport, reverse
logistics, disposal and customer service (Heizer & Render, 2008). Therefore today‟s commercial
electricity supply chain can be illustrated using figure 1.1 below;
Figure 1.1: Commercial Electricity Supply Chain
Input supply Production Transmission Distribution Consumption
Market Information
Quality Control Information
Source: Researcher, 2011
Generation is the process which converts the various primary fuels used into electricity. Kenya
Electricity Generating Company (KenGen) is the leading power generating company with an
installed capacity of 1005MW hence producing 77% of electricity in Kenya. Six more electricity
generators under the umbrella of Independent Power Producers (IPPs) have been licensed. These
are; Iberafrica Power (EA) Ltd with an installed capacity of 108MW, Tsavo Power Company Ltd
Inputs
Suppliers
Generators Transmitters Retailer Consumers
Fuel Oil
Suppliers
Regional Water
Authorities
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generating 74MW, OrPower4 Inc. generating 48MW, Mumias Sugar Company Ltd generating
26MW and Rabai Power Ltd which has an installed capacity of 90MW (Anon, 2002). In
addition these, the government formed Geothermal Development Company (GDC) as a Special
Purpose Vehicle to fast track the development of geothermal power. Other generators include
James Finlay, Sotik Tea Company, Sotik Highlands Tea Estate, Oserian Development Company,
Pan African Paper Mills, Unilever Tea Kenya Ltd and Tiomin, who are licensed to generate
electrical energy for own use (Wanyiri, 2010).
Previously, transmission function has been not been subject to competitive activity and had
remains under the control of the Kenya Power and Lightning Company (KPLC). However,
KPLC was split to create Kenya Electricity Transmission Company (KETRACO) such that
KPLC performs distribution while KETRACO performs transmission (Energy Regulatory
Commission [ERC], 2009).
The final link in the chain is distribution. This involves taking electricity from the transmission
system and connecting it to consumers and business users at the point of consumption.
Distribution of electricity is carried out by KPLC, though KETRACO and generators following
resent reforms have been bought outright parts of the regional distribution network (ERC, 2009).
KPLC buys electricity from the generating companies and provide a service to the end
customers. The supply firm is who we deal with as consumers and with whom we have the
trading relationship. It can be seen from this brief overview that there exist a value chain
electricity hence the need to study the relevant SCM practices adopted by the players.
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1.2 Statement of the Problem
The Theory of Constraints (TOC) which is based on the argument that chain is no stronger than
its weakest link, calls for integration of processes, organizations and practices for continual
achievement of a common goal. In Supply Chain Management, this theory is useful in addressing
a single link in supply chain and more so across the entire system even when the system
comprises of many different organizations. The objective of the theory is to establish a decisive
competitive edge by reducing negative impacts of interruption by shortages or surpluses
(Herman, 2000). In Kenya, demand of electricity, inadequate electric power generation,
developing transportation/transmission/distribution technologies and growing customer
expectations have forced players in electric power subsector to invest in, and direct attention to,
their supply chains. Consequently, there is pressure on these utilities to be efficient and enhance
customer service levels.
According to ERC (2009), increasing operational complexities within the electric subsector,
delays in electricity connection and disruption in power supply, higher manpower costs owing to
higher living costs and growing pressure from customers have led to the electric power utilities‟
growing awareness of the impact that an efficient supply chain can have on business
sustainability and hence the need for prudent Supply Chain Management in the electricity
industry.
Supply Chain Management Practices and their related challenges have been extensively
documented. Christopher and Lee (2004) suggests that any drive towards more efficient supply
chains during recent years has resulted in supply chains becoming more likely to be disrupted
and prone to more challenges.
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Supply Chain Management in the electric power sector in Kenya has received relatively little
attention. Wanyiri (2010) studied Total Quality Managements Practices in thermal power plants
and found that all the thermal power plant had TQM policies in place but concentrated more on
environmental management. Njau (2010) discussed value chain management and its effects in oil
companies in Kenya, noting the improvements which have been made, and still need to be made,
in purchasing and supply professionalism. However, the focus of this latter work has been
predominantly on value chain in energy sector as opposed to the broader concept of Supply
Chain Management Practices and their relevance to the electricity supply chain.
A recent research done by Barua (2010) highlighted the various challenges facing oil marketing
companies noting a dismal understanding of the Supply Chain Management practices in place
even though the companies were practicing them through strategic planning, Third Party
Logistics (3PL), SC benchmarking, vertical integration, close partnership with suppliers E-
procurement and outsourcing. In his findings he noted that Production and Operations
Management practices were not operational. His study too did not cover electricity power
utilities.
This study investigated Supply Chain Management Practices as adopted by the commercial
electricity utilities in Kenya. The study excluded those firms who are licensed to generate
electricity for their own use such as James Finlay, Sotik Tea Company, Sotik Highlands Tea
Estate, Oserian Development Company, Pan African Paper Mills, Unilever Tea Kenya Ltd and
Tiomin. The study focused on the most relevant SCM practices which have a direct relationship
with the efficiency and effectiveness of their operations and of the whole electricity supply.
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1.3 Objectives of the Study
1) To establish Supply Chain Management practices adopted by the Commercial Electricity
utilities in Kenya.
2) To establish whether the adopted practices exhibits SCM best practices relevant to these
utilities.
1.4 Value of the Study
The findings of the research provide additional knowledge for future studies on the subject area
of study.
It also provides background information which may help to design appropriate Supply Chain
Management strategies that can be adopted for circumstances suitable to the current challenges
prevailing in the industry. Those challenges related to power rationing, increasing demand and
delayed in electricity connectivity.
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CHAPTER TWO: LITERATURE REVIEW
2.1 Defining Supply Chain Management
Supply Chain Management is the systemic, strategic coordination of the traditional business
functions and the tactics across these business functions within a particular company and across
businesses within the supply chain, for the purposes of improving the long-term performance of
the individual companies and the supply chain as a whole (Mentzer, De Witt, Keebler, Min, Nix,
Smith & Zacharia, 2001).
SCM is defined by the Global Supply Chain Forum as the integration of business processes from
end-user through original suppliers that provide products, services and information that add
value for customers and other stakeholders (Cousins, Lamming, Lawson & Squire, 2008). SCM
is the design and management of seamless, value-added processes across organizational
boundaries to meet the real need of the end customer. The development and integration of people
and technology resources are critical to successful supply chain integration (Institute of Supply
Management [ICM], 2000).
A supply chain is a network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce value in the form of
products and services in the hands of the final customer or consumer (Lysons & Farrington,
2006). A supply chain, as opposed to supply chain management, is a set of organizations directly
linked by one or more of the upstream and downstream flows of products, services, finances, and
information from a source to a customer. Managing a supply chain is 'supply chain management'
(Mentzer et al., 2001).
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2.2 Commercial Electricity Supply Chain Management Practices
Kenya Electricity Supply Industry (ESI) is one of the sub-sectors in the energy sector over which
the Ministry of Energy (MoE) exercises oversight on behalf of the Government of Kenya (GoK).
The privatization programme of the 1990s brought a degree of competition into this electric sub-
sector supply chain for the first time when the former monopoly of the KPLC was unbundled
into three entities with the enactment of the Electric Power Act No. 11 of 1997 (Anon, 2002).
KPLC to carry out transmission and distribution functions, KenGen to carry out the generation
functions and ERB to regulate the power sector. The Act aimed at facilitating private sector
participation in the provisions of electricity services. The Act also allowed IPPs to enter into
Power Purchase Agreements (PPAs) with KPLC in order to add more power into the grid. In
2007, the government converted Electricity Regulatory Board (ERB) to ERC in 2007 to offer
regulatory stewardship to electricity, petroleum and new and renewable sub-sectors (Energy Bill,
2004).
Despite the emergence of a structure of private and public ownership in this subsector, the
Government maintains a regulatory stance towards businesses in the old „public‟ sector. For
example, the rules for purchasing practice by public entities in the sub sector as a whole are
covered under the Public procurement directives which detail the obligations public sector
organizations must follow in relation to tendering of business and the awarding of contracts to
suppliers (Anon, 2002). The private players may or may not follow the same procurement
directives as public entities. This brought the issue of different players having different supply
chain practices though working towards fulfillment of a common objective which is adequate
electric power energy in the country.
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The Supply Chain Operations Reference (SCOR) model gives a list of five generic supply chain
processes from which practices are derived. These are plan, source, make, deliver and return.
Altekar (2005); Power (2005), views that SCM processes can be categorized into the following
types; Plan-Demand Management, Source- Procurement Management, Make-
Operations/Manufacturing Management, Deliver- Logistics Management and Return- Reverse
Logistics. In addition there are other supporting systems which run across the whole supply
chain and contribute to the success of the system. These include; Information Technology (IT)
for SCM, SCM Performance Measurements and Customer/Supplier Relationship Management.
These processes form the basis of which various practices are derived.
2.2.1 Demand Management
Collaborative Planning Forecasting and Replenishment (CPFR) is one of best practices in
demand management. CPFR entails real time information sharing and real time decision making
based on the information received. The decision making is synchronized between all the players
in the supply chain (Stevenson, 2005).
Demand management has shifted over the years. In the 1970‟s the focus was integration of
warehousing and transportation within the firm, in the 1980‟s the focus shifted to re-engineering
of cost structures, while in the 1990‟s the focus shifted to improving customer service with the
introduction of corporate websites, internet, intranets and extranets. Today, there has been a
paradigm shift to what is known as collaboration as managers realize that long term success of
the firm will be achieved if they work within a successful supply chain. This new concept is
known as Collaborative Planning Forecasting Replenishment (Stevenson, 2005; Walters, 2008).
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In electricity generation the key is to ensure that the contracted plant capacity is maintained.
This is by way of providing maintenance spare parts as scheduled for each type of engine
required for generation. Another aspect is that of ensuring that Plant availability is above 80% at
any given time. On the distribution the demand for electricity outstrips the supply.
The demand for power has been rising faster than anticipated. Peak demand in 2003 was 790MW
but has grown to the current of 1,300MW. With an installed capacity of 1,412MW it is evident
that there is little reserve margin for system maintenance (Wanyiri, 2010). The effect is that
efficient the power utilities must have an efficient supply chain management system such that no
plant can be stopped for service maintenance until all required spare parts are availed.
2.2.2 Procurement Management
The main role of procurement is to acquire the materials needed by an organization for its
operations. Procurement or purchasing consists of all the related activities that get goods,
services and materials from suppliers into the organization. The aim of procurement is to find the
combination of products and suppliers that best satisfies your need (Waters, 2002). Procurement
involves the process of product specification or specifying of requirements, then development of
a procurement plan and raising of purchase requisition, identification of potential suppliers,
sending quotation, receiving and assessment of bids, selecting the right source, negotiating and
placing of order, expediting delivery and receipts, invoice verification and forwarding for
payment (Mentzer et al., 2001).
For the power utility firms it is crucial to establish the right sources of raw material. This is
especially so for the thermal power plants which uses Heavy Fuel Oil (HFO) with low sulphur
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content of less than 1%. Open tendering system is used by both IPPs and KenGen. On the
procurement of spares it is highly recommended to use the Original Equipment Manufacturers.
One of the best practices in procurement is the adoption of the e-procurement. According to
Baily (2008) the savings on adoption of e-procurement is estimated 40% of overall procurement
costs .E- Procurement process in the power utility firms enables the establishment and sourcing
of OEM parts directly from the manufactures of the power engines and peripherals. It also
enables support services by the firms being able to trouble should the engines online hence
reducing the down time on engines during maintenance services.
2.2.3 Operations Management
The focal point of every organization is the activities that make its products or services. These
are the operations. According to Waters (2002), everything that you own, use, buy or borrow is a
product of some organization operations. This is the Converting inputs to the desired outputs
through processes. For the case of power utilities, the inputs include raw materials, money,
people machines time and other resources required in the generation and distribution of
electricity power.
According to KIPPRA (2006), power utilities are linked by the national grid system which is
operated as an integral network, linked by a 220 kV and 132 kV transmission network. A limited
length of 66 kV transmission lines is also in use. At the generating plants the energy is produced
at a relatively low voltage between about 2.3 kV and 30 kV, depending on the size of the unit.
The generator terminal voltage is then stepped up by the power station transformer to a higher
voltage from 132 kV to 220 kV for transmission over long distances.
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At the substations, transformers reduce the voltage to a lower level for distribution to
commercial and residential users. This distribution is accomplished with a combination of sub-
transmission (33 kV to 132 kV) and distribution (3.3 to 25 kV). At the point of use, the energy is
transformed to low voltage varying by country and customer requirements (Energy Bill, 2004).
2.2.4 Logistics Management
Logistics is the process of planning, implementing, and controlling the efficient and effective
flow of storage of goods, services and related information from the point of origin to the point of
consumption for the purpose of conforming to customer requirement (Altekar, 2005). This
encompasses the eight elements of Customer Order Processing, Location Analysis, Inventory
Control, Material Handling, Packaging, Transportation, Warehouse and Customer Services.
Customers Order Management (COM) starts with order entry process and involves efficient
maintenance of customer data bases, opportunity evaluation for cross selling and up selling, back
order processing and post order fulfillment transactions. This means that there need to be a
satisfactory customer order management (Webster, 2008).
Sanderson (1999) argues that there is need for collaborative transport management in order to
optimize service delivery and minimize cost. Therefore there is need for vertical collaborations
with suppliers, customers and horizontal collaboration with other organizations. Transport
collaboration is not just about minimization of cost, it is about value optimization, visibility,
improved service levels, end customer satisfaction as well as potentially lower cost (Hammer,
2001)
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Electricity utilities have outsourced most of their logistics functions to a 3PL such as clearing
and forwarding agents. 3PL refers to the concept of outsourcing the logistics and distribution of
a manufacturing and services firms to a logistics service provider. On the other had Fourth Party
Logistics (4PL) is an arrangement in which a firm hires a specialist firm to manage logistical
operations of two or more 3PL firms already outsourced. Companies may outsource logistics
services in order to improve their strategic focus by concentrating on their key competences,
lower cost of operations, minimize risk in the operations, improvement of service levels with
improved response time and increased flexibility (Altekar, 2005).
2.2.5 Customer/Supplier Relationship Management
Customer Relationship Management (CRM) is a complex and interrelated concept with Supplier
Relationship Management (SRM) this is because Suppliers can become Customers and vice
versa. The process provides the structure for how the relationships with the customers and
suppliers are developed and maintained. This process includes identifying key
customers/suppliers, segmenting them and in order to maximise their contribution services in
service delivery. The process also includes all activities related to working with customers in
order to: improve processes, eliminate demand variability and non-value added activities and
develop agreements of metrics (Jacobs, Chase & Aquilano, 2009).
Customer service policy statements starts with identifying elements of service which are most
important to customers such as availability and capacity of electricity supply (Aquilano et al.,
2009). Elements of customer service can be categorized into pre-transaction, transaction and
post-transaction elements. The customer service policy as a pre-transactional customer service
element should be stated in writing and made available to customers.
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Some of the best practices in CRM like customer focus groups and customer satisfaction surveys
are increasingly being employed by firms. On the other had SRM takes the form of electronically
exchanging of data through the national grid control system and EDI used during ordering for the
spare parts and monitoring of consignment on transits (Waters, 2002).
2.2.6 Supply Chain Performance Measurements
Companies from time to time have to decide a certain performance criteria and also have to come
up with a way of measuring that the criteria is met. Use performance measurement to gain
insight into, and make judgments about, the effectiveness and efficiency of their programs,
processes, and people. The organizations therefore must decide on what indicators they will use
to measure their progress in meeting strategic goals and objectives, gather and analyze
performance data, and then use these data to drive improvements (Mentzer et al., 2001).
One of the frameworks used for performance measurement is Kaplan and Norton‟s Balanced
Scorecard. It is a management system that maps an organization‟s strategic objectives into
performance metrics in four perspectives: financial, internal processes, customers, and learning
and growth (Kaplan & Norton, 1996). Within each of the Balanced Scorecard financial,
customer, internal process, and learning perspectives, the firm must define the following:
Strategic objectives, what strategy is to be achieved in that perspective, Measures how progress
for that particular objective will be established and the target value sought for each measure.
2.2.7 Information Technology (IT) for Supply Chain Management
With globalization IT has became the main tool by which businesses have to create a competitive
advantage over their rivals. This is by means of multiple sourcing, Computer Aided Design
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(CAD)/Computer Aided Manufacturing (CAM), Computer integrated Manufacturing (CIM),
Manufacturing Execution Systems, Management Information Systems (MIS), Decision Support
Systems, Expert Systems, Knowledge Management Systems, Enterprise Resource Planning
(ERP), Customer Relationship Management (CRM) and Supply Chain Management (SCM)
systems. SCM encompasses ERP, manufacturing, warehouse management systems,
transportation management systems, business intelligence and analysis.
The main objectives of IT in SCM include: providing information availability and visibility,
enabling a single point of contact for data, allowing decisions based on total supply chain
information and enabling collaboration with supply chain partners (Simchi-Levi & Kaminsky,
2003). The internet has played a key role in advancing SCM capabilities since a firm can connect
its supply chain with the supply chains of suppliers and customers in a single vast network that
optimizes costs and opportunities. The aspect of Scada communication of remotely diagnosing
engine failures shows how useful the IT system is to operations and maintenance.
The major use of IT in supply chain include : an enterprise resource planning (ERP) system, e-
commerce software, c-commerce gateway, an automatic identification system such as bar coding
and a business intelligence reporting system. Some of the supported functions were: centralized
electronic catalogue, electronic requisitioning, electronic purchase order, electronic order
acknowledgement, advanced ship notice, electronic invoice and electronic funds transfer.
2.3 Supply Chain Management Best Practices
A practice may refer to a conventional, traditional, or otherwise standardised method of doing
thing. Best practices are generally-accepted, informally-standardized techniques, methods or
16
processes that have proven themselves over time to accomplish given tasks. The idea is that with
proper processes, checks and testing, a desired outcome can be delivered more effectively with
fewer problems and unforeseen complications (Nash & Ehrenfeld, 1997). In addition, a good
practice can evolve to become better as improvements are discovered. They are used to maintain
quality as an alternative to mandatory legislated standards and can be based on self-assessment
or benchmarking. These practices should help improve performance metrics by creating
consensus on demand management, forecasting, benchmarking, performance measurement,
information technology procurement, customer relationship management among others.
Lockamy & McCormack (2004) developed the Supply Chain Maturity Model, borrowing heavily
from the Business Process Orientation Model and the SCOR. This model postulates that the
operations of an organization transition have five distinct stages before attaining maturity and
excellence. They went ahead and said that only organizations that have reached the maturity
stage exhibit best practices. The five stages of maturity show the progression of activities toward
effective SCM and process maturity. Each stage contains characteristics associated with process
maturity such as predictability, capability, control, effectiveness and efficiency. This can be
illustrated using the table on the page below:
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Figure 2.1: Stages of the Supply Chain Maturity Model
STAGE CHARACTERISTICS OF STAGE
1. Ad hoc/Static supply
chain Processes are unstructured and ill-defined
Little supply chain information available, Process
measures are not in place
Minimal communication with partners
Jobs and organizational structures are not based on
horizontal SCM processes.
Individual heroics and “working around the
system” arc what makes things happen.
Process performance is unpredictable.
Targets, if defined, are often missed.
SCM costs are high.
Customer satisfaction is low.
Functional co-operation is also low.
2. Defined/Functional
Excellence
Basic SCM processes are defined and documented.
Jobs and organization basically remain traditional.
Process performance is more predictable.
Tat gets are defined but still missed more often than
not.
Overcoming the functional silos takes considerable
effort owing to boundary concerns and competing
goals.
SCM costs remain high.
Customer satisfaction has improved, but is still low.
3. Linked-Horizontal
integration
Represents the breakthrough level.
Managers employ SCM with strategic intent and
results.
Broad SCM jobs and structures are put in place
outside and on top of traditional functions.
Cooperation between intra-company functions,
vendors and customers takes the form of teams that
share common SCM measures and goals that reach
horizontally across the supply chain.
Process performance becomes more predictable and
targets are often achieved.
Continuous improvement efforts take shape
focused on root cause elimination and performance
improvements.
SCM costs begin decreasing and feelings of esprit
18
de corps take the place of frustration.
Customers are included in process improvement
efforts and customer satisfaction begins to show
marked improvement.
4. Integration/ External
collaboration
The company, its vendors and suppliers, take
cooperation to the process level.
Organizational structures and jobs are based on
SCM procedures, and traditional functions, as they
relate to the supply chain, begin to disappear
altogether.
SCM measures and management systems are
deeply imbedded in the organization.
Advanced SCM practices, such as collaborative
forecasting and planning with customers and
suppliers, take shape.
Process performance becomes very predictable and
targets are reliably achieved.
Process improvement goals at e set by the teams
and achieved with confidence. SCM costs ate
dramatically reduced
Customer satisfaction and esprit de corps become a
competitive advantage.
5. Extended/On demand
supply chain Competition is based on multiform supply chains.
Collaboration between legal entities is routine to
the point where advanced SCM practices that allow
transfer of responsibility without legal ownership
are in place.
Multi-firm SCM teams with common processes,
goals and broad authority take shape.
Trust, mutual dependency and esprit de corps are
the glue holding the extended supply chain
together.
A horizontal, customer focused, collaborative
culture is firmly in place. Process performance and
reliability of the extended system are measured and
joint investments in implying the system are shared,
as are the returns.
Source: Researcher, 2011
19
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design
A descriptive study was undertaken to ascertain and describe some of the SCM practices in the
commercial electricity utilities. This is because a descriptive design is a description of state of
affairs as it exists at present. The study was modelled alongside the Supply Chain Maturity
Model as espoused by Lockamy and McCormack (2004). The results are benchmarked against
best practices that define the extended stage of the supply chain maturity. These include: end-to-
visibility, collaboration in all areas, customer driven demand and global outsourcing.
3.2 Population of the Study
The study targeted at all commercial power firms involved in generation, transmission, and
distribution of electricity as these firms are considered to be the principal players Supply Chain
of the electric power. The approach was a census survey since the firms involved are few. These
firms are provided in the table 3.1 below;
Figure 3.1: Target Population of the Study
Function of Target Firm in
the Supply Chain
Name of the Firms No. of Firms
Generation KENGEN, Iberafrica, Tsavo, Orpower4,
Mumias, Rabai and GDC
7
Transmission/Distribution KETRACO and Kenya Power 2
Source: Researcher, 2011
20
3.3 Data Collection Method and Instruments
Primary data was used to establish the various SCM practices adopted by the utility players in
which case primary data is the most appropriate. Target respondent were Senior Managers in
charge of Supply Chain. The subjects discussed included supply chain structures and policies,
procurement strategy, e-Business adoption issues, the role of external players and their
conformity to supply chain management best practices.
A questionnaire was used with the aim of assessing the various positions of different firms under
the study in terms of application of best SCM practices. The following processes were assessed:
Demand management, procurement management, logistics management, customer/supplier
management, IT for SCM and performance measurements. The respondents were required to
indicate one answer on a 5-point Likert scale at the end of each question.
The questionnaire was self administered. One questionnaire was sent to each company and
circulated to all relevant departmental heads in order to get feedback for supply chains within the
electricity supply chain. The questionnaires were distributed to the respondents, who filled them.
The questionnaires were collected from the respondents once they are filled.
3.4 Data Analysis
The questions were grouped as per the SCM functional area highlighted earlier as: Demand
management, Operations Management Procurement management, Logistics management,
Customer/Supplier Management, IT for SCM and Performance measurements. Descriptive and
inferential statistics was used to summarize the information.
21
CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION
4.1 Descriptive Statistics of Power Utilities Studied
Before embarking on the details of empirical issues, it‟s important to examine demographics
characteristics of the power utilities studied. All the nine utilities in power sector targeted
responded and we can say the study achieved 100% response rate. All the respondents from
power utilities studied are procurement officials except respondent from Mumias Sugar
Company who was an engineer. This implies the respondents are familiar with SCM practices in
their utilities and hence are capable of commenting and providing answers to questions under
investigation.
As table 4.1 shows, 44.44 % of the respondents have worked for the power utilities for 5 to 10
years, 33.34% have worked for less than five years while 22.22% have worked for over ten
years. This indicates that the most secretaries have worked for long within the electrical power
industry hence they are aware of their utilities activities as well as on issues under investigation.
Table 4.1: Years of Experience of Respondents in Power Industry
Years of Experience of Respondents Frequency Percentage
Less than 5 Years 3 33.34
5 - 10 Years 4 44.44
Over 10 Years 2 22.22
Total 9 100
Source: Researcher, 2011
22
4.2 Supply Chain Management Practices Adopted by Power Utilities in Kenya
Descriptive statistics are used to describe and summaries the responses of the respondents on
SCM practices adopted by the commercial electricity utilities in Kenya. The descriptive
statistics utilized in this part is mean. The mean is a measure of central tendency, and provides an
arithmetic average for the distribution of scores. For each practice respondents were asked to rate
their opinion implementation status on various aspects of practices using a five likert scale:
definitely implemented = 5, often implemented = 4, frequently implemented = 3, sometimes
implemented = 2 and not implemented = 1. For each opinion, mean score was calculated. To
establish Supply Chain Management practices adopted by the Commercial Electricity utilities in
Kenya, a mean of means for each practices implemented was calculated and reported on table 4.2
below. All the mean scores were above the expected average of 2.5 implying that all the
practises are implemented by power utilities.
Table 4.2: Implementation Status of Supply Chain Management Practices
Supply Chain Management Practices
Mean Score
Status of Implementation
Procurement Management 3.795 Often Implemented
Customer/Suppliers Relationship Management 3.776 Often Implemented
Operations Management 3.608 Often Implemented
Demand Management 3.573 Often Implemented
Logistics Management 3.214 Frequently Implemented
Information Technology for Supply Chain Management 3.032 Frequently Implemented
Supply Chain performance Measurements 2.868 Frequently Implemented
Source: Researcher, 2011
Procurement Management is the most implemented practice with a mean score of 3.795 followed
by Customer/Suppliers Relationship Management with a mean of 3.776. Other followed in this
order Operations Management, Demand Management, Logistics Management, Information
23
Technology for Supply Chain Management and then Supply Chain performance Measurements
with mean scores of 3.608, 3.573, 3.214, 3.032 and 2.868 respectively. It therefore appears that
all SCM practices considered in the literature review are implemented by the power utilities in
Kenya however, the rate/frequency of implementation differ for each practices; while as demand
management, procurement management, operations management and customer/suppliers
relationship management are often implemented, the logistics management, supply chain
performance measurements and information technology for supply chain management are
frequently implemented.
4.3 Supply Chain Management Best Practices in Power Utilities in Kenya
In order to understand whether the SCM practices implemented exhibits best practices, each
respondent was asked rate the implementation of best practices conforming to the practices.
Respondents‟ responses were rated in a 5 likert scale. The mean score for each best practice
were calculated and presented using tables. Mean score of 5, 4 and 3 implies that the best
practices are applied, below this was considered that best practices are not implemented. Below
is the report of best practices applied by power utilities in each functional area considered.
4.3.1 Demand Management
The demand for power has been rising faster than anticipated. There demand planning is very
important to ensure adequate power supply. In demand planning it is important to consider the
best practices. Table 4.3 below shows some of the best practices and how they were scored by
the respondents. There is less formal involvement of suppliers in the process of forecasting and
quantification. At the same time need assessment and customer requirement is captured for the purposes
of planning .This confirms with finding of Stevenson (2005) that Collaborative Planning
24
Forecasting and Replenishment (CPFR) is one of best practices in demand management. The
results are presented using table 4.3 below:-
Table 4.3: Supply Chain Management Best Practices in Demand Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply
Need assessment is done before acquisition
4.33
Often
implemented
yes
All items are known and we have established a coding
system 4.33
Often
implemented
yes
There is a system of capturing customer requirement at any
given time. 3.78
Often
implemented
yes
We have implemented a stocks management system for
spare parts for un-programmed Maintenance activities 3.78
Often
implemented
yes
There is a demand planning based on statistical modelling
techniques e.g. Collaborative Planning Forecasting and
Replenishment (CPFR),ABC analysis , ERP e.t.c 3.44
Frequently
implemented
Yes
There is a formal involvement of suppliers in the process of
forecasting and Quantification. 1.78
Sometimes
implemented
No
Mean of Means Score
3.573 implemented
Yes
Source: Researcher, 2011
4.3.2 Procurement Management
Procurement is process of acquiring materials needed by an organization for its operations.
Several activities are involved in procurement which are: product specification or specifying of
requirements, then development of a procurement plan and raising of purchase requisition,
identification of potential suppliers, sending quotation, receiving and assessment of bids,
selecting the right source, negotiating and placing of order, expediting delivery and receipts,
invoice verification and forwarding for payment. In Kenya power utilities the following best
practices in procurement management are applied: reliability and flexibility are considered in
supplier selection, all purchase orders and contracts are serially and easy to monitor with supporting
25
documentation and reconciliations for delivered items are always done in supplier presence. These
findings confirms to arguments of Mentzer et al. (2001). The results are presented using table 4.4
below:-
Table 4.4: Supply Chain Management Best Practices in Procurement Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply All purchase orders & contracts are serially and easy to
monitor with supporting documentation 4.56
Definitely
implemented
Yes
We consider Reliability and Flexibility to be important in
supplier selection. 4.56
Definitely
implemented
Yes
The purchases always reflect the purchase plan guided by
budget 4.33
Often
implemented
Yes
We consider the 5Ps to be our key guide in supplier
selection 4.13
Often
implemented
Yes
We give equal opportunity to all prospective bidders
by open tendering system and bids evaluation 3.89
Often
implemented
Yes
Procurement process complains are documented
3.78
Often
implemented
Yes
Reconciliations for delivered items are always done in
supplier presence. 2.89
Frequently
implemented
No
We have Implemented an EDI and world wide web for
sourcing globally 2.22
Sometimes
implemented
No
Mean of Means Score 3.795 implemented Yes
Source: Researcher, 2011
4.3.3 Operations Management
The findings show the operations management in SCM in power utilities in Kenya exhibits the
following best practices; internal and external customer complaints are timely responded to,
there is continuous improvement strategy to encounter electricity trips, adequate utilization of
factors, the firms meet obligations as per the PPA, there is maintain the stated availability, there
is a maintenance schedules which are strictly followed and quality management system are
audited regularly. This confirms views of Waters (2002) that the focal point of every
26
organization is the activities that make its products or services hence need to have best practices
on these activities. The results are presented using table 4.5 below:-
Table 4.5: Supply Chain Management Best Practices in Operations Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply We have a quality management system audited regularly
4.57
Definitely
implemented
Yes
Well trained staff are employed to run the operations of the
plant 4.22
Often
implemented
Yes
We have quality Management system that ensures the
electricity availability is in place. 4.22
Often
implemented
Yes
We have a Environmental Management System audited
regularly 3.89
Often
implemented
Yes
Our operations efficiency are easily measurable as per PPA
3.88
Often
implemented
Yes
We have a continuous improvement strategy to encounter
electricity trips. 3.44
Frequently
implemented
Yes
We always respond to our internal and external customer
complains in time. 3.33
Frequently
implemented
Yes
We have a maintenance schedules in place which are
strictly followed 3.33
Frequently
implemented
Yes
We always meet our obligations as per the PPA. 3.25
Frequently
implemented
Yes
We always maintain the stated availability
2.89
Frequently
implemented
No
We always fulfil our utilization factor.
2.67
Frequently
implemented
No
Mean of Means Score 3.608 implemented Yes
Source: Researcher, 2011
4.3.4 Logistics Management
Logistics encompasses the eight elements of Customer Order Processing, Location Analysis,
Inventory Control, Material Handling, Packaging, Transportation, Warehouse and Customer
Services. It is important that all this activities follow the best practices. Logistics Management in
power utilities exhibits the following; there is system of monitoring Materials and Spares in
27
Transits e.g. Logistics Management System, there is lead-time schedule available for all
programmed spares, there use of returnable /reusable containers in logistics and there is
collaborative transport management with a complete database of all our suppliers and agents.
Best practices in logistics are frequently implemented with a mean average of 3.2 as described
below:-
Table 4.6: Supply Chain Management Best Practices in Logistics Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply All overseas orders have specific code used for easier
identification and Location monitoring 4
Often
implemented
Yes
Logisticians are constantly updated with the changing laws
and their implications 3.63
Often
implemented
Yes
We have a system of monitoring Materials and Spares in
Transits e.g. Logistics Management System 3.44
Frequently
implemented
Yes
We have make use of returnable /reusable containers for
our logistics 3.44
Frequently
implemented
Yes
We have a lead-time schedule available for all
programmed spares 3.22
Frequently
implemented
Yes
We have collaborative transport management with a
complete database of all our suppliers and agents 2.89
Frequently
implemented
No
We have tools to measure performance of our 3PL
providers 1.88
Sometimes
implemented
No
Mean of Means Score 3.214 implemented Yes
Source: Researcher, 2011
4.3.5 Supply Chain Performance Measurements
Power utilities use performance measurement to gain insight into, and make judgments about,
the effectiveness and efficiency of their programs, processes, and people. The organizations
therefore must decide on what indicators they will use to measure their progress in meeting
strategic goals and objectives, gather and analyze performance data, and then use these data to
drive improvements. However, it is important to consider best practice in performance
28
measurement. Supply chain performance measurements in power utilities exhibits the following
Order cycle where all orders are monitored and suppliers are rated all the time, SCM Key
Performance Indicators on which are reported every month, bench marking of various functions
of supply chain and Balance Score Card is used.
Table 4.7: Supply Chain Management Best Practices in Performance Measurements
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply
Supplier Evaluation and re-evaluation is done on a
continuous basis 3.78
Often
implemented
Yes
There is bench marking of various functions of supply chain
3
Frequently
implemented
Yes
We have implemented Order cycle where all orders are
monitored and suppliers are rated all the time 3
Frequently
implemented
Yes
We have implemented SCM Key Performance Indicators
on which are reported every month 2.88
Frequently
implemented
No
Balance Score Card is used in our organization
2.67
Frequently
implemented
No
SCOR model is implemented in our company
1.88
Sometimes
implemented
No
Mean of Means Score 2.868 implemented No
Source: Researcher, 2011
4.3.6 Customer/Suppliers Relationship Management
In electrical power, Customer Relationship Management (CRM) is a complex and interrelated
concept with Supplier Relationship Management (SRM) this is because Suppliers can become
Customers and vice versa. It is important Customer/Suppliers Relationship Management apply
best practices. Some of the best practices in CRM in power utilities are: There is ERP system
that has a customer relationship module for real time information on customers, customer is
deemed important to power business, there is dedicated call centre for customer service, they
visit their suppliers to ascertain Progress and real situations, and customers are reminded of
overdue bill for settlement. These finding confirms with Aquilano et al., (2009) argument that
29
customer service policy statements starts with identifying elements of service which are most
important to customers such as availability and capacity of electricity supply. The results are
presented using table 4.8 below:-
Table 4.8: Supply Chain Management Best Practices in Customer /Supplier Relationship
Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply
We believe that customer is very important to our
business 4.89
Definitely
implemented
Yes
Suppliers have a freedom to visit us and discuss with us
improvements 4.22
Often
implemented
Yes
We frequently make contacts to our customers in order to
respond to complains. 4.22
Often
implemented
Yes
We have an elaborate system of gathering customer
suggestions. 4.11
Often
implemented
Yes
We vary our products and services are as per customer
requirements. 4
Often
implemented
Yes
My organization has a system for evaluating customer
satisfaction. 3.89
Often
implemented
Yes
My organization greatly considers customer requirements
in the delivery of services/products. 3.89
Often
implemented
Yes
We always consider our customers when making power
generation decisions. 3.63
Often
implemented
Yes
We always remind our customers of overdue bill for
settlement 3.33
Frequently
implemented
Yes
We have a dedicated call centre for customer service
3.25
Frequently
implemented
Yes
We have an ERP system that has a customer relationship
module for real time information to our customers 3
Frequently
implemented
Yes
We are visit our suppliers to ascertain Progress and real
situations 2.89
Frequently
implemented
No
Mean of Means Score 3.776 implemented Yes
Source: Researcher, 2011
30
4.3.7 Information Technology for Supply Chain Management
IT in SCM include: providing information availability and visibility, enabling a single point of
contact for data, allowing decisions based on total supply chain information and enabling
collaboration with supply chain partners. In power utilities the following Best Practices in
Information Technology for Supply Chain Management are presences; there is an ERP system
that has a customer relationship module for real time information to our customers, they have
embraced e-sourcing and EDI in our supply chain management system, there have automated all
our materials and spare parts for in our warehouse by use of bar coding system, there have an
VMI to manage stocks which triggers our re-order points, and all supply chain information is
stored in a centralized server and accessible by all supply chain stake holders.
Table 4.9: Supply Chain Management Best Practices in Information Technology for
Supply Chain Management
Best Practices
Mean
Score
Status of
Implementation
Does best
practices
apply
All supply chain information is stored in a centralized
server and accessible by all supply chain stake holders. 3.33
Frequently
implemented
Yes
We have automated all our materials and spare parts for
in our warehouse by use of bar coding system. 3.22
Frequently
implemented
Yes
We have an ERP system that has a customer relationship
module for real time information to our customers. 3.11
Frequently
implemented
Yes
We have an VMI to manage our stocks which triggers
our re-order points 3
Frequently
implemented
Yes
We have embraced e-sourcing and EDI in our supply
chain management system. 2.5
Frequently
implemented
No
Mean of Means Score 3.032 implemented Yes
Source: Researcher, 2011
31
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS
5.1 Summary of Findings
The purpose of this study was to establish Supply Chain Management practices adopted by the
Commercial Electricity utilities in Kenya, and establish whether the adopted practices exhibits
SCM best practices relevant to these utilities. The result reveals that a number of SCM practices
are practiced by electrical power utilities in Kenya. These are; Procurement Management is the
most implemented practice with a mean score of 3.795 followed by Customer/Suppliers
Relationship Management with a mean of 3.776. Other followed in this order Operations
Management, Demand Management, Logistics Management, Information Technology for
Supply Chain Management and then Supply Chain performance Measurements with mean scores
of 3.608, 3.573, 3.214, 3.032 and 2.868 respectively. It therefore appears that all SCM practices
considered are implemented in similar manner by the power utilities in Kenya however, the
rate/frequency of implementation differ for each practices; while as Demand Management,
Procurement Management, Operations management and Customer/suppliers Relationship
Management are often implemented, the Logistics Management, Information Technology for
Supply Chain Management and Supply Chain Performance Measurements being the least
implemented practice. In addition, to a larger extent there is application of best practices in most
of these functions with the exception of Performance Measurements activities scoring a mean
score of less that 3 which signified that best practices are not implemented in that area.
32
5.2 Conclusions
From the findings above, the one would conclude that the supply chain management practises
adopted by commercial electricity utilities in Kenya are similar. Further it can be said that the
processes of activities of demand management, procurement management, operations
management, logistics management and reverse logistics in all commercial power utilities in
Kenya to a large extent exhibits the best practises in supply chain management. In addition there
are other supporting systems which run across the whole supply chain and contribute to the
success of the system, these include; information technology (IT) for SCM, SCM performance
measurements and customer /supplier relationship management.
5.3 Recommendations for Improvements
SCM best practices are generally-accepted, informally-standardized techniques, methods or
processes that have proven themselves over time to accomplish given tasks. The findings of the
study revealed that some SCM practices exhibits best practices while others do not. The
following are recommended to improve supply chain performances in electric power
generation, transmission and distribution.
In demand management there is need to formally involve suppliers in the process of forecasting
and quantification. There is need to ensure assessment material is done before acquisition. There
is need to ensure all materials are known and there established a coding system for all materials.
There is need implemented a stocks management system for spare parts for un-programmed
Maintenance activities.
33
In procurement management, there is need to embrace the EDI to guide in supplier selection,
giving equal opportunity to all prospective bidders by open tendering system and bids evaluation
is recommended, and the utilities should ensure that procurement process complains are
documented and addressed.
In operations management, there is need for quality Management system that ensures the
electricity availability is in place, utilities should ensure well trained staff are employed to run
the operations of the plant, the management should ensure operations efficiency are easily
measurable as per PPA and finally there is need to establish a Environmental Management
System audited regularly.
With regard to supply chain performance measurements, there is need to ensure that SCM key
performance indicators are set and necessary tools of Supply Chain Measurement such are
Balance Score Card or SCOR are in place. Benchmarking purchase order cycles also require
some improvement. This notwithstanding the need to have supplier evaluation and re-
evaluation is done on a continuous basis in order to maintain relevant supplier databases.
To improve in customer/suppliers relationship management, there is need to have an elaborate
system of gathering customer suggestions, suppliers need to have a freedom to visit us and
discuss with us improvements need to streamline supply chain. The utilities should greatly
consider customer requirements in the delivery of services/products.
In logistics management, the management should ensure logisticians are constantly updated with
the changing laws and their implications, there in place tools to measure performance of 3PL
34
providers and all overseas orders have specific code used for easier identification and Location
monitoring.
In general, Information Technology needs to be embraced in the entire the supply chain in order
to ensure that relevant technology is applied. E-sourcing was rated very low when it should be
fully implemented in this era of globalisation. Some models such as VMI and EDI could enhance
efficiency in replenishment and warehouse management. More so IT for the in performance
measurement in establishing lead time and consignment tracking in logistics management.
5.4 Recommendations for Further Research
The study was limited to the electricity industry utilities. A similar study may be done to other
industry such as utilities such as manufacturing and agricultural sector.
35
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APPENDICES
Annex I: Research Instruments
PART A: Introduction Letter
Dear Respondent,
I am a MBA student at University of Nairobi currently undertaking my research project entitled
“Commercial Electricity Supply Chain Management Practices in Kenya”. The attached
questionnaire is for gathering data, which will be useful in the aforementioned research. You
have been selected as one of the respondents in this study. I therefore request you to kindly
facilitate the collection of the required data by answering the questions herein.
Please note the information sought is purely for academic purposes and will be treated with
utmost confidentiality.
I look forward to your co-operation.
Yours faithfully,
Joseph Murage
39
PART B: Questionnaire
The purpose of this questionnaire is to investigation of Supply Chain Management Practices
being used in the electricity generation, transmission and distribution in Kenya. Kindly answer
by ticking on the boxes provided or by writing a brief statement in the provided spaces.
SECTION A: General Information
1. Name of the organization ___________________________________________________
2. Nature of core business
a. Electricity Generation
b. Electricity Transmission
c. Electricity Distribution
d. Other (Specify) _____________________________________________________
3. Position in the organization _________________________________________________
4. Your department__________________________________________________________
5. Experience at the organization (in years) _______________________________________
40
SECTION B: Supply Chain Management Practices
Using a likert scale of 1-5, indicates the extent to which your company implements the practices
listed below. Kindly score by ticking each practice as objectively as possible using the following
guide lines:
1. Not Implemented 2. Sometimes Implements 3. Frequently Implemented 4. Often Implemented 5. Definitely Implemented
No. Demand Management 1 2 3 4 5
1 There is a system of capturing customer requirement at any given time.
2 There is a demand planning based on statistical modelling techniques e.g.
Collaborative Planning Forecasting and Replenishment (CPFR),ABC
analysis , ERP e.t.c
4 Need assessment is done before acquisition
5 All items are known and we have established a coding system
6 We have implemented a stocks management system for spare parts for un-
programmed Maintenance activities
7 There is a formal involvement of suppliers in the process of forecasting and
Quantification.
Procurement Management
8 We consider the 5Ps to be our key guide in supplier selection
9 We consider Reliability and Flexibility to be important in supplier selection.
10 We give equal opportunity to all prospective bidders by open tendering system and
bids evaluation
11 We have Implemented an EDI and world wide web for sourcing globally
12 All purchase orders & contracts are serially and easy to monitor with supporting
documentation
13 Procurement process complains are documented
14 Reconciliations for delivered items are always done in supplier presence.
15 The purchases always reflect the purchase plan guided by budget
41
Operations Management 1 2 3 4 5
16 Well trained staff are employed to run the operations of the plant
17 We have quality Management system that ensures the electricity availability is in
place.
18 Our operations efficiency are easily measurable as per PPA
19 We always meet our obligations as per the PPA.
20 We always respond to our internal and external customer complains in time.
21 We have a continuous improvement strategy to encounter electricity trips.
22 We always fulfil our utilization factor.
23 We always maintain the stated availability
24 We have a maintenance schedules in place which are strictly followed
25 We have a Environmental Management System audited regularly
26 We have a quality management system audited regularly
Logistics Management
27 We have a system of monitoring Materials and Spares in Transits e.g. Logistics
Management System
28 We have a lead-time schedule available for all programmed spares
29 We have make use of returnable /reusable containers for our logistics
30 All overseas orders have specific code used for easier identification and Location
monitoring
31 We have tools to measure performance of our 3PL providers
32 Logisticians are constantly updated with the changing laws and their implications
33 We have collaborative transport management with a complete database of all
our suppliers and agents
Supply Chain Performance Measurements
34 We have implemented Order cycle where all orders are monitored and suppliers are
rated all the time
35 We have implemented SCM Key Performance Indicators on which are reported
every month
36 There is bench marking of various functions of supply chain
37 Balance Score Card is used in our organization
38 SCOR model is implemented in our company
39 Supplier Evaluation and re-evaluation is done on a continuous basis
42
Customer/Supplier Relationship Management 1 2 3 4 5
40 We believe that customer is very important to our business
41 We have an elaborate system of gathering customer suggestions.
42 My organization has a system for evaluating customer satisfaction.
43 We vary our products and services are as per customer requirements.
44 My organization greatly considers customer requirements in the delivery of
services/products.
45 We always consider our customers when making power generation decisions.
46 We frequently make contacts to our customers in order to respond to complains.
47 We have a dedicated call centre for customer service
48 We always remind our customers of overdue bill for settlement
49 We are visit our suppliers to ascertain Progress and real situations
50 Suppliers have a freedom to visit us and discuss with us improvements
51 We have an ERP system that has a customer relationship module for real time
information to our customers
Information Technology (IT) for Supply Chain Management
52 We have an ERP system that has a customer relationship module for real time
information to our customers.
53 We have automated all our materials and spare parts for in our warehouse by use of
bar coding system.
54 We have an VMI to manage our stocks which triggers our re-order points
55 We have embraced e-sourcing and EDI in our supply chain management
system.
56 All supply chain information is stored in a centralized server and accessible
by all supply chain stake holders.